GBP/EUR Could Gain if CPI Slows
While the Pound was trending slightly lower against the Euro on Friday as a result of declining UK consumer confidence, GBP/EUR could rally before the weekend if the Eurozone’s latest inflation report provides cause for concern.
Ahead of the Eurozone CPI release, GBP/EUR was trending in the region of 1.2836
EUR Exchange Rates Edge Lower ahead of German Labour Market Data
The Pound Sterling to Euro (GBP/EUR) exchange rate strengthened by around 0.2% on Thursday morning.
As traders await key German labour market data, the single currency edged lower versus its major peers. Meanwhile, the UK unit continues to hold a position of strength even after April’s Nationwide House Price data saw slower-than-expected growth on both an annual and monthly basis.
The Pound Sterling to Euro (GBP/EUR) exchange rate is currently trending in the region of 1.2855.
- UK Pound holds strong position following sustained relief rally
- Euro rebounds from recent losses thanks to positive domestic data
- British quarterly growth slowed in line with expectations
- GBP/EUR exchange rate forecast to hold losses amid damp risk appetite
Pound Sterling (GBP) Exchange Rate Holding Strong Position after Annual Growth Betters Estimates
In recent weeks the British Pound has enjoyed a sustained relief rally as concerns regarding a ‘Brexit’ eased following favourable opinion polls for those hoping the UK remains a member of the European Union.
Gains have somewhat slowed today, however, thanks to mixed results from domestic data and reduced risk-appetite. Whilst annual Gross Domestic Product came in at 2.1% in the first-quarter, bettering the market consensus of 2.0%, the quarterly figure met with expectations of 0.4%; a drop from the previous quarter’s 0.6% growth.
The Office for National Statistics stated that slowing growth was due to disappointing output from the manufacturing and construction sectors. Services output continues to be the main driver of British economic growth.
Since the announcement of the June 23rd EU referendum the Pound has been trading much like a high-risk currency. As such, damp market sentiment has also slowed the Sterling relief rally. Risk-appetite was significantly reduced following news that Malaysia’s 1Malaysia Development Berhad (1MDB) defaulted on a series of bonds.
‘Most investors feared more of the political impact of the 1MDB saga than anything,’ said Edwin Gutierrez of Aberdeen Asset Management in London. ‘But with Malaysian Prime Minister Najib Razak having survived the threat, I think most investors are focused much more on the economic fundamentals.’
Despite all this, however, the UK unit continues to trend higher versus the majority of its most traded rivals.
The Pound Sterling to Euro (GBP/EUR) exchange rate is currently trending in the region of 1.2887.
Euro (EUR) Exchange Rates Edge Higher after German Consumer Confidence Trumps Expectations
Having softened considerably of late, amid speculation that weak Euro-area inflation will prompt additional stimulus measures from the European Central Bank (ECB), the single currency climbed versus a number of its major peers today.
The initial uptrend was the result of US Dollar weakness. The North-American asset has seen reduced demand as traders await tonight’s key Federal Open Market Committee (FOMC) interest rate decision. Whilst not expected to alter rates, policymakers are forecast to reiterate the need to be ultra-cautious when approaching changes to monetary policy.
Positive domestic data also supported demand for the single currency today. Of particular significance was GfK’s German Consumer Confidence survey which bettered the median market forecast 9.4 in May, with the result actually reaching 9.7.
According to survey compilers GfK, ‘German consumer optimism improved distinctly in April. The overall index is forecasting 9.7 points for May, up from 9.4 points in April. Growth is being observed for both economic and income expectations as well as propensity to buy. Consumers are clearly assuming that the German economy will regain some momentum in the coming months. Economic expectation rose accordingly in April. Income expectation and propensity to buy have both made noticeable gains, once again improving their already very good level.’
The Pound Sterling to Euro (GBP/EUR) exchange rate dropped to a low of 1.2837 during Wednesday’s European session.
GBP/EUR Exchange Rate Forecast: FOMC Rate Decision in Focus
Tonight’s FOMC interest rate decision is likely to be a significant market mover, especially if policymakers surprise traders. With the Euro and US Dollar negatively correlated, the decision will have a marked impact on the GBP/EUR exchange rate.
Looking further ahead, Thursday will see a number of high-impact European ecostats. German labour market data and inflation data will likely cause significant changes for the Pound Sterling to Euro (GBP/EUR) exchange rate.
With a complete absence of British data tomorrow, the UK unit will likely to continue to trend in reaction to political developments regarding the EU referendum.
The Pound Sterling to Euro (GBP/EUR) exchange rate reached a high of 1.2909 during Wednesday’s European session.